Apple Arcade & The Mobile Gaming Revolution
“When does casual gaming stop being casual?”
One of my closest friends brought up this important point earlier yesterday in reference to Apple Arcade. As mobile games become more powerful, internet faster, we’re increasingly able to play complex games on mobile. Apple plans to lead the charge with Apple Arcade, incentivizing casual gamers and hardcore gamers alike (and perhaps people who haven’t even considered games) to try their service.
Why is Apple, historically thought of as a hardware company, pursuing a services strategy? For better or for worse, Apple is expanding horizontally across services in an attempt to build an entire ecosystem: finance, entertainment (holistically with TV, Music and Games), cloud, and they’re all housed under their hardware vertical. I think of their expansion into games in two ways:
Discoverability: Much like digital PC storefront, Steam, the App Store is cluttered with games and apps. The massive quantity of content can negatively hide high quality games. Despite Apple’s efforts to curate the best content for its users, value will inevitably be lost to the challenge of discovering good games.
Apple Arcade brings the best games developed by the most creative studios all in one affordable library. Apple’s function is to refresh titles, mitigate the paralyzing and scary woes of optionality, and assure a high standard of games. Community — an appreciation for their developers and users — is at the heart of their decision for a subscription service, something Steam could’ve done long ago before the Epic Games Store disrupted the market. With the current political games climate centered around loot boxes and microtransactions, there’s something to be said that Apple Arcade has taken a firm stance against microtransactions/freemium models, which overpopulate the mobile games market today.
Accessibility: This is Apple’s biggest value add (and p.s. they did it far before Stadia even launches). I love the thought that someone can start playing a game on their phone and then switch to their Macbook to continue their progress at a later time. Further, it’s noteworthy that there are already more mobile platform gamers worldwide than on PC and console combined. Specifically for the US, there’s an immense opportunity to convert users onto the mobile platform from other platforms. It’s affordable and accessible because mobile games have by nature a lower barrier to entry than their rival platforms. Moreover, SaaS is an intrinsically sticky product offering: start a few games in your free month trial and you’ll likely pay for another month to complete the offering.
But a problem: from my third-party perspective, it doesn’t seem that Apple Arcade has any plans to incorporate social aspects into their games. And sure, they champion up to six users per subscription, but can they play together? Today, much of the value we place on games is the opportunity to interact anonymously or with friends online. Come back home from work and school, and enter the ‘third place’ digitally to hang out with others. It augments our player experience. It propels viral growth in games and services. It gives us a sense of competition and creativity. Perhaps, this is a plan for the future, but I see no current functionality to integrate with streaming services like Youtube or Twitch. Why not give people the ability to share experiences and talk about games? It’s an important aspect of our content creator economy today.
Apple bets on mass appeal to the casual gamer persona, where completion and short sessions are the goal. Candy Crush, 2048, Subway Surfer — These are examples of games we can pick up for a ten minute session on our commute to work and put them down without hesitation. Take games like Overland and Sayonara Wild Hearts, these (and a bulk of other Apple Arcade titles) are the types of games we are more intentional about, the ones we spend hours playing and exploring.
What’s the goal? Is the mix of titles an attempt at figuring out a target market, hardcore or casual? Or is Apple’s intended focus truly and solely an entry-point for all demographics of gamers?
For the over 1 billion active Apple devices, the $4.99 price point and 100 game library is indeed an attractive proposition. Specifically for the West’s console-centric market, this mobile games subscription is here to change our conception of mobile games monetization in a profound way.
Apple forecasts 50 million users for Apple Arcade. Let’s do some quick math for the initial market opportunity:
Scenario 1: Similar to Netflix’s acquisition strategy of original content, Apple pays a flat rate for each game in its library, an estimated cost of 300 million dollars. 50 million subscribers x 4.99 = 250 million dollars in one month. They would essentially recuperate the cost within 2 months.
Scenario 2: Apple continues its current strategy of a 70/30 revenue split. That means they earn a total of $1.50 per subscriber per month. $1.50 x 50 million subscribers x 4 months = 300 million dollars. Ultimately, it’s a less cost-effective strategy for Apple than Scenario 1, but gives more money to the studios and incentivizes them to continue to push updates/ develop new games.
I’m less inclined to believe that Apple will pursue Scenario 2 as the logistics of revenue distribution to each of the games in its library could get murky; that is, would studios get paid for the time spent in a specific game? That wouldn’t make much sense as some games are intrinsically longer than others, the flat rate fee makes more sense. The point for Apple Arcade is to decrease the amount of money Apple loses out per game on the 70/30 revenue split without compromising the vast library of content Apple currently provides. And this is where Apple Arcade, compared to, say, Apple Music, wins: they don’t pay incrementally more money per game as they do per licensed song.
A few parting thoughts (some questions, critiques and appreciations):
- Most everyone has a mobile phone, but not everyone has an Apple product (given their nature as a luxury product). Will they ever pursue a Microsoft-esque strategy and make their games accessible on all devices? Are they purchasing exclusive rights to their games to not allow them to push out to Android devices?
- Developers can now create games without necessarily worrying about marketing and monetization. Apple can handle that for them. How will Apple determine success of a specific game (number of sessions, time spent in game, reviews)?
- How will Apple localize content to other regions of the world like Asia, which already champions a mobile-first gaming culture? As Asia (China in specific) begins to market to Western audiences, Apple will need to reverse penetrate into the Asian market, amid tighter games regulations and mobile games competition.
- Software follows their hardware strategy. The iPhone 11 is set to have a minimum of 4GB of RAM, giving developers more creative liberties.
- Overall, an initial library of more casual indie games is a really interesting thought: games for all. The priority is to get people hooked on the service and then to start introducing segmentations like esports and multiplayer? Ultimately, mobile allows for a larger number of tournaments to happen locally: dollar-to-player value is very high
- A one month free trial is an amazing intro into a service for anyone (like myself) looking to satisfy their curiosity.
- Will Apple start acquiring mobile games studios to establish their foothold in the mobile games market? Incumbents Microsoft and Sony are looking to other platforms, while Nintendo is developing their own IP for mobile.
- The true test will be to get people to shell out $5 a month in addition to their Netflix, Hulu, VRV, Stadia, NYT, Apple Cloud, and Xbox Games Pass subscriptions. That’s a lot of subscriptions. How will Google Play respond?
There’s still lots to digest, and Apple Arcade’s performance in the upcoming couple months will clarify a lot. Ultimately, it comes down to whether or not a service like this will be more profitable than games on the App Store. The answer: maybe. Amid all the controversies of the 70/30 model, games like the wildly successful Fortnite, will likely remain on the App Store and generate loads of money for Apple. In the theme of luxury and exclusivity that is typical of Apple, Apple Arcade is just another way for them to make more money off of existing content. They’ll transform our conception of mobile games — how they’re monetized, played and developed — along the way.
I write a weekly gaming newsletter called The Pause Button, which explores the intersection of innovation, entertainment, and socialization in games, and their impact on society
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